UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-24205
FACTUAL DATA CORP.
-----------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1449911
--------------------------------- ------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5200 Hahns Peak Drive, Loveland
Colorado 80538
---------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
(970) 663-5700
---------------------------------
(Issuer's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of May 12, 2000.
Class Number of Shares
- ------------------ ---------------------
Common Stock 5,381,501
Transitional Small Business Disclosure Format: [ ] Yes [X] No
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<PAGE>
FACTUAL DATA CORP.
INDEX
PART I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000
(Unaudited) and December 31, 1999 ............ 3
Unaudited Consolidated Statements of
Income -- For the Three Months
Ended March 31, 2000 and March 31, 1999 ...... 4
Unaudited Consolidated Statements of Cash
Flows -- For the Three Months Ended
March 31, 2000 and March 31, 1999 ............ 5
Notes to Unaudited Consolidated Financial
Statements ................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 7-10
PART II. Other Information
Item 1. Legal Proceedings .............................. 11
Item 6. Exhibits and Reports on Form 8-K ............... 11
SIGNATURES ............................................. 12
Index to Exhibits ...................................... 13
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<PAGE>
FACTUAL DATA CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31,
2000 December 31,
(Unaudited) 1999
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents ............................... $ 419,124 $ 1,023,945
Prepaid expenses and other .............................. 1,021,882 949,542
Accounts receivable, net ................................ 5,075,373 3,663,094
----------- -----------
Total current assets .............................. 6,516,379 5,636,581
Property and equipment, net .............................. 6,336,749 5,998,532
Intangibles .............................................. 27,378,453 27,756,373
Other assets ............................................. 160,865 300,989
----------- -----------
$40,392,446 $39,692,475
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Line-of-credit .......................................... $ 1,400,000 $ 500,000
Current portion of long-term debt ....................... 3,266,439 3,432,526
Accounts payable ........................................ 3,818,670 3,099,678
Accrued payroll and expenses ............................ 855,389 968,691
Deferred income taxes ................................... 13,386 13,386
----------- -----------
Total current liabilities .......................... 9,353,884 8,014,281
Long-term debt ........................................... 5,058,994 5,908,584
Deferred income taxes .................................... 438,728 410,645
Shareholders' equity
Preferred stock, 1,000,000 shares
authorized; none issued and
outstanding ............................................ -- --
Common stock, 10,000,000 shares
authorized; 5,480,585 at March 31,
2000; 5,381,501 at December 31,
1999 issued and outstanding ............................ 22,490,214 22,478,244
Retained earnings ........................................ 3,050,626 2,880,721
----------- -----------
Total shareholders' equity .......................... 25,540,840 25,358,965
----------- -----------
$40,392,446 $39,692,475
=========== ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these consolidated statements.
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<PAGE>
FACTUAL DATA CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended
March 31,
----------------------------
2000 1999
----------- -----------
Revenue
Information services .............. $ 6,979,067 $ 4,391,299
Ancillary income .................. 496,453 477,714
System affiliates ................. 313,310 483,869
Training, license and other ....... 500 --
----------- -----------
Total revenue ................. 7,789,330 5,352,882
----------- -----------
Operating Expenses
Costs of services provided ........ 4,367,766 2,976,054
Consolidation costs ............... 289,500 267,611
Selling, general and administrative 1,793,080 815,171
Depreciation and amortization ..... 911,306 434,233
----------- -----------
Total operating expenses ...... 7,361,652 4,493,069
----------- -----------
Income from operations ............. 427,678 859,813
Other income (expense)
Other income ...................... 71,531 59,797
Interest expense .................. (211,922) (85,854)
----------- -----------
Total other expense ........... (140,391) (26,057)
Income before income taxes ......... 287,287 833,756
Income tax expense ................. 117,382 325,223
----------- -----------
Net income and comprehensive income $ 169,905 $ 508,533
=========== ===========
Basic earnings per share ........... $ .03 $ 0.14
=========== ===========
Weighted average shares outstanding 5,380,103 3,596,663
=========== ===========
Diluted earnings per share ......... $ .03 $ 0.13
=========== ===========
Weighted average shares outstanding 5,480,585 3,790,037
=========== ===========
Supplemental Information
EBITDA (a) $ 1,410,515 $ 1,353,843
(a) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization. EBITDA should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative to cash
flow (as a measure of liquidity or ability to service debt obligations) and is
not in accordance with, nor superior to, generally accepted accounting
principles, but provides additional information for evaluating Factual Data
Corp.
The accompanying notes to unaudited consolidated financial statements are an
integral part of these consolidated statements.
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<PAGE>
FACTUAL DATA CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income ....................................... $ 169,905 $ 464,275
----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization ................... 911,306 108,822
Deferred income taxes ........................... 28,083 25,611
Changes in operating assets and liabilities
Accounts receivable ............................ (1,412,279) (552,617)
Prepaid expenses ............................... (72,340) (15,598)
Other assets ................................... 140,124 10,301
Accounts payable ............................... 718,992 472,369
Accrued payroll, payroll taxes and expenses .... (113,302) 151,950
----------- -----------
200,584 200,838
----------- -----------
Net cash provided by operating activities ... 370,489 665,113
----------- -----------
Cash flow from investing activities
Purchase of property and equipment ................ (423,639) (292,056)
Increase in note receivable ....................... -- (3,263)
Additional acquisition costs on prior acquisitions (215,738) --
Capitalized software costs ........................ (206,028) --
----------- -----------
Net cash used in investing activities ....... (845,405) (295,319)
----------- -----------
Cash flows from financing activities
Principal payments on long-term debt ............. (1,041,875) (100,050)
Deferred offering costs incurred net of
accounts payable ................................ -- (109,946)
Net activity on line of credit ................... 900,000 --
Net proceeds from employee stock option plan ..... 11,970 --
----------- -----------
Net cash used in financing activities ....... (129,905) (209,996)
----------- -----------
Net (decrease) increase in cash and cash equivalents (604,821) 159,798
Cash and cash equivalents, at beginning of period .. 1,023,945 396,752
----------- -----------
Cash and cash equivalents, at end of period ........ $ 419,124 $ 556,550
=========== ===========
</TABLE>
Supplemental disclosure of cash flow information:
Interest paid on borrowings for the three months ended March 31, 2000
and 1999 was $211,922 and, $85,854 respectively.
Supplemental disclosure of non-cash investing and financing activities:
During the three months ended March 31, 2000 and 1999, the Company
financed fixed assets purchases totaling $37,939 and $60,870,
respectively, with notes payable and capital leases. During the three
months ended March 31, 2000 and 1999, the Company incurred $ -0- and
$1,018,685, respectively, in offering costs that were included in
accounts payable.
The accompanying notes to unaudited consolidated financial statements are
an integral part of these consolidated statements.
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<PAGE>
FACTUAL DATA CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies
The consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The consolidated
financial statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission March 31, 2000, which includes
audited financial statements for the years ended December 31, 1999 and 1998. The
results of operations for the three months ended March 31, 2000, may not be
indicative of the results of operations for the year ended December 31, 2000.
The Company's diluted earnings per share takes into account warrants
issued in the Company's IPO, the private equity offering and other outstanding
stock options.
Note 2: Line-of-Credit
The Company refinanced its line-of-credit during the first quarter of 2000.
The line-of-credit at March 31, 2000 consists of:
$3,000,000 line-of-credit, interest payable at
8.75% principal and unpaid interest due April
2001. The line-of-credit requires the Company
to meet certain financial restrictive covenants.
The line is collateralized by substantially all
the assets of the Company........................ $1,400,000
==========
Note 3: Stockholder's Equity
On March 1, 2000, in connection with a consulting agreement to provide investor
relations services, the Company granted an investor relations firm three stock
purchase warrants with the following terms:
<TABLE>
<CAPTION>
Description Number of Warrants Exercise Price Term
----------- ------------------ -------------- -----------------------------
<S> <C> <C> <C>
Series A Warrants 30,000 9.00 March 1, 2000 - March 1, 2003
Series B Warrants 30,000 11.00 March 1, 2000 - March 1, 2003
Series C Warrants 40,000 13.00 March 1, 2000 - March 1, 2003
100,000 $9.00 - 13.00 March 1, 2000 - March 1, 2003
</TABLE>
The warrants become exercisable by the holder only once the Company's stock
trades at the specified exercise price for 20 consecutive days. Additionally,
the Series B and C warrants provide for certain performance criteria to be met
prior to being exercisable. The Company will record consulting expense in
connection with the warrants in future periods once they are vested and become
exercisable.
The Company also issued 1,398 shares of stock to employees valued at $11,970 in
connection with the Company's Employee Stock Purchase Plan during the first
quarter of 2000.
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<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
This filing contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking statements include the plans and objectives of management for
future operations, including plans and objectives relating to services offered
by and future economic performance of the Company.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties that might
adversely affect the Company's operating results in the future in a material
way. Such risks and uncertainties include, but are not limited to; changes in
interest rates, the effectiveness of the Company's marketing campaign, the
response of the mortgage industry, continued market demand for the Company's
services, the effects of seasonality in the housing market, competition, the
success of the Company's consolidation plan, its ability to manage growth, and
the Company's ability to successfully develop and market new report services.
Overview
Factual Data Corp. is a Loveland, Colorado-based information service
provider to the mortgage and consumer lending industries, employers, landlords
and other business customers located throughout the United States. The Company
markets its services through its website www.factualdata.com, and nationally
through 44 combined locations, including Company operated offices, franchisees
and licensees.
Factual Data Corp. was formed in 1985 to provide customized credit
reports to mortgage lenders. In the past fifteen years, we have greatly
expanded our business by developing a wide range of information services and
sophisticated technology to deliver those services. We were among the pioneers
in delivering business-to-business information services via electronic commerce.
For over seven years, our customers have been able to reap the benefits of our
information services by way of electronic order and delivery with the touch of a
few buttons from their PC. Today, nearly all of our customers receive our
customized reports by modem or network delivery directly to their computers.
Factual Data became a publicly traded company in 1998 and its common stock and
warrants trade on the NASDAQ National Market under the symbols FDCC and FDCCW.
In the first quarter 2000, Factual Data's portfolio of services included
fully automated consumer credit reports, employee screening, resident screening,
and similar information services for businesses and government-sponsored
enterprises. Items of note in the first quarter included the introduction of our
CorpData commercial credit reporting service, the release of our technological
interface with Trakker Corporation's automated underwriting system, our
agreement with Cavion.com which marked our emergence as an information service
provider to the credit union market segment, and new national accounts with
First Franklin Financial, Accubank Mortgage and Loan Link Financial.
For more information about our services, or items of note to investors,
please visit our website www.factualdata.com. The website shall not be deemed to
be part of this report.
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<PAGE>
Results of Operations
The following table sets forth for the periods indicated, as a
percentage of total revenue, those items included in the Company's Unaudited
Consolidated Statements of Income:
For the Three
Months Ended
March 31
---------------
2000 1999
----- -----
Revenue
Information services .............. 89.6% 82.1%
Ancillary income .................. 6.4 8.9
System affiliates ................. 4.0 9.0
Training, license and other ....... 0.0 0.0
----- -----
Total revenue ................. 100.0% 100.0%
----- -----
Operating expenses
Costs of services provided ........ 56.1 55.6
Consolidation costs ............... 3.7 5.0
Selling, general and administrative 23.0 15.2
Depreciation and amortization ..... 11.7 8.1
----- -----
Total operating expenses ...... 94.5% 83.9%
----- -----
Income from operations .............. 5.5 16.1
Other income (expense)
Other income ...................... 0.9 1.1
Interest expense .................. -2.7 -1.6
----- -----
Total other expense ........... -1.8 -0.5
----- -----
Income before income taxes .......... 3.7 15.6
Income tax expense .................. 1.5 6.1
----- -----
Net income and comprehensive income . 2.2% 9.5%
===== =====
Supplemental Information
EBITDA (a) 18.1% 25.3%
(a) EBITDA is defined as earning before interest, income taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to cash flow (as
a measure of liquidity or ability to service debt obligations) and is not in
accordance with, nor superior to, generally accepted accounting principles, but
provides additional information for evaluating Factual Data Corp.
Comparison of three months ended March 31, 2000 and March 31, 1999
Information services revenue increased $2.59 million, or 59%, from $4.39
million in the first quarter 1999 to $6.98 million in the first quarter 2000.
The increase was primarily a result of our acquisitions. We completed
twenty-eight acquisitions through the first quarter 2000 compared to eleven
acquisitions through the first quarter 1999. We continued to diversify in the
business to business information services sector, with employment screening and
resident qualifier services. Diversification into non-first mortgage lending,
new clients like the Money Store, and new business partners like Fannie Mae, all
also contributed to increased revenues in the first quarter 2000.
Ancillary income represents fees paid by System Affiliates for various
additional products and services provided to them. Ancillary income increased by
$18,700, or 4%, from $478,000 in the first quarter 1999 to $496,000 in the first
quarter 2000. The increase is primarily a result of us providing additional
services to our System Affiliates.
- 8 -
<PAGE>
System Affiliates revenues decreased $171,000, or 35%, from $484,000 in
the first quarter 1999 to $313,000 in the first quarter 2000. The decrease is
due to the acquisition of nine System Affiliates and the reduced royalty fees.
The reduction in System Affiliates revenues is expected to continue as we
acquire additional System Affiilates and phase out our franchising and licensing
programs.
Costs of services increased $1.39 million, or 47%, from $2.98 million in
the first quarter 1999 to $4.37 million in the first quarter 2000. The increases
in direct operational costs are related to our increased revenues. The cost of
services, as a percentage of revenue, was relatively unchanged from the first
quarter of 1999 at 55.6% compared to the first quarter of 2000 at 56.1%. Through
the first quarter 2000 twenty-eight acquisitions were completed as compared to
eleven acquisitions through the first quarter 1999. As true variable cost, these
cost of services are directly related to salaries, bureau costs, and
telecommunication costs.
Selling, general and administrative expenses increased $975,000, or
120%, from $815,000 in the first quarter 1999 to $1.79 million in the first
quarter 2000. This increase is related to costs associated with building our
corporate, regional processing and technology infrastuctures. Throughout 1999
and into the first quarter of 2000, we focused on the building of a new
foundation for Factual Data Corp. By sucessfully creating a dynamic
infrastructure, in terms of management, national account sales, and technology,
we expect continued success in attracting and retaining large national accounts
across service lines.
Consolidation costs for the first quarter 2000 were $290,000 as compared
to $268,000 for the first quarter 1999. These costs include one time
consolidation charges for items such as recruiting fees, salaries for terminated
owners and managers of acquired businesses, and travel costs for the
consolidation and relocation of our regional processing centers.
Depreciation and Amortization for the first quarter 2000 was $911,000
compared to $434,000 for the first quarter 1999. This increase of $477,000, or
110%, reflects the amortization expense for twenty-eight acquisitions through
the first quarter 2000 compared to eleven acquisitions through the first quarter
1999.
Interest expense increased $126,000, or 147%, from $86,000 in the first
quarter 1999 to $212,000 in the first quarter 2000. This increase is due to
additional notes payable issued in connection with our acquisitions.
Income taxes decreased $208,000, or 64%, from $325,000 in the first
quarter 1999 to $117,000 in the first quarter 2000. Our effective tax rate for
the first quarter 1999 was 39% and 41% for the first quarter 2000.
As a result of the foregoing factors, net income for the first quarter
2000 was $170,000, or $0.03 per diluted share, based on 5,480,585 shares
compared to $509,000, or $0.13 per diluted share, based on 3,790,037 shares for
the first quarter 1999. This earning per share calculation takes into account
consolidation costs of $290,000 or $0.05 per diluted share for the first quarter
2000.
Our first quarter 2000 EBITDA (earnings before interest, taxes,
depreciation and amortization) was $1.41 million, or $0.26 per diluted share
based on 5,480,585 shares, as compared to $1.35 million, or $0.36 per
diluted share based on 3,790,037 shares in the first quarter 1999. In the first
quarter 2000, this EBITDA per share calculation takes into account consolidation
costs of $290,000, or $0.05 per diluted share, as a result of acquisitions,
through the first quarter 2000. Excluding the consolidation costs we would have
reported EBITDA for the first quarter 2000 of $1.7 million, or $0.31 per diluted
share.
As previously stated, EBITDA should not be considered as an alternative
to net income (as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt obligations) and
is not in accordance with, nor superior to, generally accepted accounting
principles, but provides additional information for evaluating Factual Data
Corp.
Liquidity and Capital Resources
We had cash and cash equivalents of $419,000 at March 31, 2000. We were
able to manage the net impact of accounts receivable, accounts payable, and
accrued expenses on cash flows from operations, which with net income of
$170,000 and depreciation and amortization of $911,000 resulted in cash flow
provided from operations of $351,000.
- 9 -
<PAGE>
We used cash and cash equivalents of $424,000 to purchase additional
equipment and furniture to finish building the infrastructure for our corporate
and regional centers. We also used cash to fund $1.02 million of principal
payments on long-term debt. Net cash used for the continuing acquisition costs
were $216,000, and net activity on the line of credit was $900,000.
Management believes that our anticipated cash requirements for the
immediate future will be met from internally generated funds. The Company
currently has a working capital deficit and is negotiating with a bank a working
capital, acquisition and debt restructure line for a total of a $10 million
credit facility.
Inflation
Although we cannot accurately anticipate the effect of inflation on our
operations, we do not believe that inflation has had, or is likely in the
forseeable future to have, a material effect on our results of operations or
financial condition.
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<PAGE>
II - OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of the registrant's annual report on Form 10K-SB for the year
ended December 31,1999.
Item 6. Exhibits and Reports on Form 8-K
Exhibits - The following exhibits are filed herewith:
No. Description
----------------- ---------------
27 Financial Data Schedule
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 12, 2000
FACTUAL DATA CORP.
(Registrant)
/s/ Jerald H. Donnan
---------------------------
Jerald H. Donnan
President and Chief
Executive Officer
(Principal Executive
Officer)
/s/ Todd A. Neiberger
---------------------------
Todd A. Neiberger
Chief Financial Officer
(Principal Financial and
Accounting Officer)
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 419,124
<SECURITIES> 0
<RECEIVABLES> 5,219,366
<ALLOWANCES> 143,993
<INVENTORY> 0
<CURRENT-ASSETS> 6,516,379
<PP&E> 9,839,259
<DEPRECIATION> 3,502,510
<TOTAL-ASSETS> 40,392,446
<CURRENT-LIABILITIES> 9,353,884
<BONDS> 5,058,994
0
0
<COMMON> 22,490,214
<OTHER-SE> 3,050,626
<TOTAL-LIABILITY-AND-EQUITY> 40,392,446
<SALES> 0
<TOTAL-REVENUES> 7,789,330
<CGS> 0
<TOTAL-COSTS> 4,657,266
<OTHER-EXPENSES> 2,704,386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 211,922
<INCOME-PRETAX> 287,287
<INCOME-TAX> 117,382
<INCOME-CONTINUING> 169,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,905
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
